Most people treat their pension as something separate from their estate.
It’s your retirement pot. And if anything is left when you die, it passes to your chosen beneficiaries — usually outside inheritance tax.
That has been the position for years.
It’s also about to change.
From 6 April 2027, unused pension funds and most pension death benefits will be brought inside your estate for inheritance tax purposes. For many families, that means a tax bill where there wasn’t one before.
At J.J. Taylor & Co Solicitors, we’re already building this into estate planning conversations with clients across Armagh and Northern Ireland — because waiting until 2027 is too late.
What’s Actually Changing?
Right now, if you die with money in a defined contribution pension (which most people have), it usually passes outside your estate.
No inheritance tax.
From April 2027, that changes. Your pension will be added to the total value of your estate alongside your house, savings, and investments.
If that combined value exceeds:
£325,000 (standard nil-rate band), or
up to £500,000 if the residence nil-rate band applies
…the excess is taxed at 40%.
That’s not a small tweak. That’s a structural change.
Who This Hits (And It’s More People Than You Think)
This isn’t just a “wealthy family” issue.
You’re in scope if you:
Have a workplace or personal pension with money left in it
Have been drawing down but haven’t exhausted the pot
Own a home and have modest savings alongside your pension
In Northern Ireland, where many estates are built around a house plus a pension, this could push a lot of families over the threshold without them realising it.
If your plan was to leave your pension untouched and pass it down — the numbers now look very different.
What’s Still Exempt?
Not everything is caught.
Transfers to a spouse or civil partner remain exempt
Death-in-service benefits stay outside the estate
Defined benefit dependant pensions are excluded
So if everything passes to your spouse, you’re broadly in the same position.
The issue arises when wealth passes to children or other beneficiaries.
The Practical Problem: Your Executor Now Has a Headache
This change doesn’t just increase tax — it increases complexity.
Your personal representative (executor) will now have to:
Track down every pension you held
Obtain valuations
Include them in the inheritance tax return
Ensure the tax is paid before funds are released
The government is proposing a mechanism allowing pension providers to withhold up to 50% of benefits for up to 15 months to cover the tax.
That tells you everything you need to know — this isn’t straightforward.
And in reality? Many people have multiple pensions across different employers. Finding them all is not trivial.
The Bit Most People Miss: Potential Double Tax
This is where it gets uncomfortable.
If you die over 75, pension funds paid to your beneficiaries are already subject to income tax in their hands.
From 2027, those same funds may also be subject to inheritance tax in your estate.
That’s a potential double hit.
The government has said it will address this — but as things stand, the detail is not finalised. Until it is, this is a real risk sitting in the background.
What Should You Actually Do Now?
This is not something to park for later.
If anything, 2026 is the year to act.
You should:
1. Review your will
Most wills weren’t drafted with pensions inside the estate. Yours probably wasn’t either.
2. Check your pension nominations
If your pension is going to someone other than your spouse, the tax position changes significantly.
3. Look at your drawdown strategy
For some, it may now make sense to use pension funds earlier rather than preserving them.
4. Get joined-up advice
This sits right between legal and financial planning. If your solicitor and financial adviser aren’t aligned, you’ll miss things.
A Final Word
For decades, pensions sat outside the inheritance tax system.
That door is closing.
For many families, the pension pot is the second-largest asset after the home. Pulling it into the estate will quietly push more estates into tax — without people noticing until it’s too late.
This isn’t a scare story. It’s a confirmed change.
The only question is whether you plan for it — or leave your family to deal with the consequences.
If you want to review your will, sense-check your estate, or understand how this affects your family, get in touch.
At J.J. Taylor & Co Solicitors, we advise clients in Armagh and across Northern Ireland on wills, estate planning, and inheritance tax — in plain English, and with a plan that actually works. Contact us today.